Zambia's central bank held its policy rate steady at 9.75 percent, saying an expected increase in inflationary pressures in December are likely to be moderated by the central bank's tight policy stance.
"Hence, after weighing the inflationary risks, the Committee decided to sustain the current relatively right monetary monetary policy stance and maintain the Bank of Zambia policy rate at 9.75%," the central bank said.
Zambia's inflation rate rose slightly to 7.0 percent in November from 6.9 percent in October, above the central bank's 6.0 percent target for the year, but in line with the bank's expectations.
The central bank raised its rate by a total of 50 basis points in June and July.
Inflationary pressures are expected to emanate from the lagged effects of the recent depreciation of the kwacha's exchange rate coupled with higher seasonal demand for some consumer products as the holiday season approaches and a seasonal increase in the prices of maize grain and mealie meal, the Bank of Zambia said.
Like many other emerging market currencies, the kwacha fell in late May through early July but then rebounded and rose until the end of October. It then dropped by 5 percent to 5.58 per U.S. dollar on Nov. 10 from late October. Earlier today it was trading at 5.50 to the dollar.
Last week an official at the central bank said a drop in the kwacha to near its weakest levels in 4-1/2 years was temporary and it was set to rebound.
Emmanuel Pamu, financial markets director at the central bank told Bloomberg that the kwacha would be in an equilibrium at a rate of 5.30 to 5.40 to the dollar.
www.CentralBankNews.info
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